REUTERS - India's stock markets were little changed on Monday as investors kept to the sidelines a day before the Reserve Bank of India's policy meeting at which it is expected to cut interest rates by at least 25 basis points.
Asian shares held largely firmer after upbeat U.S. jobs and factory data hinted at stronger corporate earnings without increasing concerns of potential U.S. interest rate hikes.
Sentiment back home also got a lift after a business survey showed India's manufacturing activity expanding for the third straight month in March, driven by stronger demand.
However, the focus remained on the outcome of the RBI's policy review on Tuesday. Most analysts expect the repo rate to be cut by 25 bps although five out of 50 analysts polled by Thomson Reuters predicted a 50 bps cut.
Traders are also expecting measures to increase liquidity in the country's banking system as periodic cash crunches are seen impacting the effectiveness of the monetary policy.
"There could be a tinge of disappointment for the market if RBI cuts rates just by 25 bps and does not do much to boost liquidity," said Deepak Jasani, head of retail research at HDFC Securities.
"If the statement accompanying the credit policy is not dovish despite a 25 bps rate cut, it could disappoint markets".
The Nifty was 0.13 percent higher at 7,723.60 by 1.30 p.m., while the Sensex was down 0.05 percent at 25,257.66.
The S&P BSE Bankex index fell 0.35 percent after gaining 16 percent last month amid rate-cut hopes. State Bank of India and ICICI Bank were down 0.7 percent and 0.4 percent, respectively.
Cigarette makers ITC and Godfrey Phillips India fell 2 percent and 4 percent, respectively, after they suspended production over health warning rules.
Cox & Kings rose 3.9 percent after the travel company divested majority stakes in U.K. online leisure providers LateRooms and Superbreak for 20 million pounds.
IT services provider MphasiS lost 1.5 percent after Hewlett Packard Enterprise said it would sell most of its stake in the company to Blackstone.
Geometric jumped 17.5 percent after the company said it would sell its IT services business to HCL Technologies in an all-stock deal valued at 12.37 billion rupees.
(Reporting by Aastha Agnihotri in Bengaluru; Editing by Subhranshu Sahu)
